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Time for a KPI reality check?

Posted by Colin Bradshaw December 16, 2020

KPIs-1

These days, there are a number of measures of success used by advertisers to demonstrate how effective their medium is. These stats are used to justify pumping large amounts of cash into advertising, be it via traditional above the line (ATL) ads or the plethora of digital channels now available.

Typical KPIs might include:

  • ROAS or ROMI or ROI – Return on Advertising Spend, Marketing Investment or simply Investment
    What you’ve spent compared to the amount of revenue, net revenue or uplift revenue you’ve achieved.
    In simple terms, this is a great way of tracking cash out versus cash in. The issue is, while you generally have a clear view of what you’ve spent, attributing revenue to a specific campaign or ad is incredibly tricky.
    Did people see the ad and then purchase as a result? Were they influenced but bought later? Did they see but not register the ad, then bought later anyway? Or did they buy having never seen the ad at all?
    You can see how quickly it all gets rather subjective.
  • Reach
    How many people might have seen your advert.
    The emphasis here is on might. This is only the potential audience size, so again, the advert may not have actually been seen by everyone.
  • Frequency or OTS – Opportunity To See
    How many times an individual has been exposed to your advert.
    Again, they may have seen it several times, but whether they took in all the details is another matter.
    This is key from a conversion and cost efficiency perspective and is critical in your ROAS calculations. Frequency is often tied in to overall performance metrics, too.
    If the frequency is too high, you’ve wasted money by reaching the same people too often. Too low and your message will have been lost in the crowd.
  • CPA – Cost Per Acquisition
    How much it costs you to acquire a new customer or sale.
    Since it’s an aggregated cash out metric, this one’s easy to realise and you can be sure your finance colleagues will know these numbers inside out.
  • Viewability rate
    How often your advert actually gets seen.
    This is important in ROAS calculations as it can be used to optimise viewable impressions.
  • Conversion rate
    How many people made a purchase compared to the number who visited your site or saw an ad.
    As well as being a useful measure of ad response, this can give an insight into the rest of the buyer journey. For instance, if you see a sudden uplift in site visits after an ad launches, but your conversion rate stays stubbornly low, there might be an issue with your user experience.

All of these metrics can be useful, whether it’s for Board reports or building business cases. But your ads don’t exist in splendid isolation.

Consumers are being bombarded with other ads (including your competitors’) across multiple channels almost 24/7. And so we come to Share Of Voice.

 

The volume’s up to 11

In the noisy world of advertising, Share Of Voice essentially tracks how much of the din you can claim as your own. And no-one dares back off for fear of missing an opportunity or losing out to a competitor.

The old joke that ‘only half my advertising works, the problem is I don’t know which half’ has never been more apt. So why is the relatively untargeted ‘spray and pray’ technique still so widely used?

Great strides have been made in behavioural approaches where content is served based on observed actions. From keyword searches to repeat visits to specific areas of a site, we’ve never had so much audience insight.

So it’s a curious phenomenon that, given how quick we are to identify consumer trends and adopt new channels, we’re very slow to break out of the tried and trusted ways of doing things – including how we use our marketing budgets.

In this age of AI and multi-sourced data points, we should surely be moving away from inferred audiences and probabilistic approaches. At best they’re percentage plays and at worst sheer guesswork.

 

Back to reality

The future is in a data-driven, deterministic approach based on real things happening in the real world.

Let’s take a house move as an example. Around 2.5 million people move into owner-occupied properties each year and about twice that into rental properties.

These homemovers represent a hugely valuable audience who spend significant amounts before, during and after moving. So why are so many removal, furniture and broadband companies for instance, not talking to these people at the very moment they’re most likely to buy? Especially when the ones who are have seen such impressive results.

A leading national furnishing retailer, which engages homemovers through well-timed below the line (BTL) communication, consistently achieves an ROI in excess of £20:1 – the lowest CPA of all their marketing activity.

With returns like that up for grabs, it’s interesting that many brands still plough the old, familiar furrow and invest heavily in broadcast-style media with no real targeting behind it, other than some ATL segmentation models or potentially erroneous buying signals from the digital world.

This is the equivalent of standing in the High Street and shouting “anyone need some boxes and a van?” as opposed to knocking on all the doors in the road that have a for sale board outside them. It seems pretty obvious, so why are so many brands not focusing their efforts like this?

I suspect the answer lies in not having the confidence to move some money away from the traditional advertising line into a smart, data-driven budget. This, despite the fact that results are more measurable, and the ROI is usually twice that of less targeted media.

As a new decade approaches, it would be nice to see brand advertisers being braver and moving away from the old-fashioned, shouting in the street approach.

Now if only there were a company out there who could help identify these real-world buying indicators…

#2020Vision

 


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